The oil & gas market is poised for substantial growth, amid stable demand and surging industrial activity fueling steady demand for refined petroleum products. While clean energy technologies continue to advance, the shift from fossil fuels remains gradual, solidifying oil & gas’ critical role in powering the global economy in the near term.

With countries like the U.S., Canada, Guyana, and Argentina boosting production, now may be a smart time to consider strong oil stocks like Cenovus Energy (CVE - Get Rating), Obsidian Energy Ltd. (OBE - Get Rating), and Suncor Energy (SU - Get Rating).

Oil prices rebounded slightly after hitting some lows, driven by short-covering and signaling a modest recovery. According to the EIA, global oil consumption is set to climb by 1.0 million barrels per day (b/d) in 2024, with further growth to 1.2 million b/d in 2025, fueling optimism in the market. The Henry Hub natural gas prices are expected to rise to $2.80 per MMBtu in Q1 2025, driven by strong seasonal winter demand. Meanwhile, interest rate cuts and favorable policies are expected to support growth, making 2025 a robust year.

Furthermore, the oil & gas outlook is positive due to strong financial performance, investments in low-carbon technologies, and increased efficiency. Considering these favorable trends and strong demand, let’s now explore the fundamentals of the three featured Energy – Oil & Gas stocks, starting with number three.

Stock #3: Cenovus Energy Inc. (CVE - Get Rating)

Headquartered in Calgary, Canada, CVE and its subsidiaries develop, produce, refine, transport, and market crude oil, natural gas, and refined petroleum products internationally. The company operates through the Oil Sands, Conventional, Offshore, Canadian Refining, and U.S. Refining segments.

In terms of the trailing-12-month levered FCF margin, CVE’s 8.28% is 18.6% higher than the 6.98% industry average. Likewise, its 1.02x trailing-12-month asset turnover ratio is 114.6% higher than the 0.48x industry average. Furthermore, its 8.03% trailing-12-month Return on Total Capital is 14.3% higher than the 7.02% industry average.

CVE’s revenues for the third quarter ended September 30, 2024, were C$14.25 billion ($10.14 billion), with earnings before income tax at C$1.02 billion ($725.85 million). For the same quarter, net earnings were C$820 million ($583.53 million) or C$0.42 per common share. Additionally, the company’s adjusted funds flow stood at C$1.96 billion ($1.39 billion) or C$1.05 per share.

For the quarter ending December 31, 2024, CVE’s EPS and revenue are expected to increase 19.1% and 15.9% year-over-year to $0.33 and $11.31 billion, respectively. CVE’s stock has declined 6.9% over the past month to close the last trading session at $15.02.

CVE’s POWR Ratings reflect this positive outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Within the Energy – Oil & Gas industry, it is ranked #14 out of 77 stocks. It has a B grade for Quality. To see the other ratings of CVE for Growth, Value, Momentum, Stability, and Sentiment, click here.

Stock #2: Obsidian Energy Ltd. (OBE - Get Rating)

Headquartered in Calgary, Canada, OBE engages in the exploration, production, and development of oil and natural gas properties in Western Canada.

In terms of the trailing-12-month gross profit margin, OBE’s 62.93% is 36.8% higher than the 46.01% industry average. Similarly, its 27.52% trailing-12-month EBIT margin is 41.2% higher than the 19.49% industry average. Its 63.50% trailing-12-month EBITDA margin is 83.2% higher than the 34.66% industry average.

In the second quarter ending June 30, 2024, OBE’s production revenues increased 8.9% year-over-year to C$218.20 million ($155.28 million), and funds flow from operations grew 26.1% year-over-year to C$124.70 million ($88.74 million). Moreover, the company’s net income stood at C$33.20 million ($23.63 million), or $0.42 per share, up 33.9% and 40% from the previous year’s quarter, respectively.

Analysts expect OBE’s revenue for fiscal 2024 to increase 6.9% year-over-year to $571.42 million. Its EPS for fiscal 2025 is expected to rise 17.5% year-over-year to $4.59. Over the past three months, the stock has declined 10.3% to close the last trading session at $5.31.

OBE’s POWR Ratings reflect its bright prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system.

It has a B grade for Value. Within the same industry, OBE is ranked #10. To access OBE’s additional grades for Growth, Momentum, Stability, Sentiment, and Quality, click here.

Stock #1: Suncor Energy Inc. (SU - Get Rating)

Headquartered in Calgary, Canada, SU operates as an integrated energy company in Canada, the United States, and internationally. It operates through three segments: Oil Sands, Exploration and Production, and Refining and Marketing.

In terms of the trailing-12-month Return on Common Equity, SU’s 18.46% is 50.4% higher than the 12.28% industry average. Its 15.73% trailing-12-month net income margin is 37.3% higher than the 11.45% industry average. Also, its 8.84% trailing-12-month Return on Total Assets is 76.1% higher than the 5.02% industry average.

During the third quarter which ended September 30, 2024, SU’s adjusted operating earnings were C$1.87 billion ($1.33 billion), or C$1.48 per common share. Likewise, the company’s adjusted funds from operations were C$3.79 billion ($2.70 billion), or C$2.98 per common share, reflecting year-over-year increases of 4.2% and 6.4%, respectively.

Street expects SU’s revenue for the quarter ending March 31, 2025, to increase 4.1% year-over-year to $9.50 billion. Its EPS for fiscal 2024 is expected to grow 1% year-over-year to $3.81. SU surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 19.5% to close the last trading session at $38.27.

SU’s POWR Ratings reflect its solid fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system.

It is ranked #7 in the Energy – Oil & Gas industry. It has an A grade for Quality and a B for Momentum and Stability. Click here to see the additional grades of SU for Growth, Value,  and Sentiment.

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SU shares were trading at $38.40 per share on Friday afternoon, down $0.75 (-1.92%). Year-to-date, SU has gained 25.13%, versus a 29.20% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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